People who are out of work for more than two years could be referred to a
community service scheme or face losing their benefits, the Government
announced today.

Jobseekers who fail to get "sustainable employment" for two years despite the efforts of the Work Programme would be expected to do community work as ministers try to tackle unemployment.

A pilot will be tested in four key areas - Derbyshire; Lincolnshire, Nottinghamshire and Rutland; East Anglia; and Leicestershire and Northamptonshire - before the programme is rolled out nationwide in 2013.

Chris Grayling, work and pensions minister, said: “We want a welfare state which is a ladder up which people climb not a place in which they live.

“If people who are fit for employment, still haven’t managed to find a job after the intensive support provided by the Work Programme, we want them to do community work and get into the habit and routine of work.

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The Government said it wanted to send a "clear message" to the unemployed that refusal to engage with the support on offer would affect their financial support from the state.

A spokeswoman for the Department for Work and Pensions said the Government would expect participants in the scheme to do jobs such as office and administrative roles, manual work, gardening, retail, care and charity work.

The announcement, to which the Prime Minister referred during his appearance at the Liaison Committee, comes after it was claimed that one million people would lose incapacity benefits through the Coalition's welfare reforms.

A report from Sheffield Hallam University warned "vast numbers" would be left impoverished as changes to benefits would make it tougher to qualify for payouts.

Professor Steve Fothergill, co-author of the report, said: “The large numbers that will be pushed off incapacity benefits over the next two to three years are entirely the result of changes in benefit rules.

“The reduction does not mean that there is currently widespread fraud, or that the health problems and disabilities are anything less than real.”